The moans and groans over skyrocketing housing prices in Vancouver and Toronto are almost as loud as the warnings of impending doom in the form of a housing bubble about to burst.
But a housing boom doesn’t have to be a bad thing for Canada, according to a new report from CIBC Economics.
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“While some might welcome a cooling-off period for these markets, the same can’t be said for the Canadian economy,” the report states.
High energy prices are not coming back any time soon, it points out. Exports are sluggish. Having a robust housing market is not so bad, the report argues — as long as proper policy is in the mix.
We need to build more houses, creating jobs and keeping those employed in the sector busy, it states. While not a quick solution, this will boost supply, and slightly “cushion further price appreciation.”
This can be achieved, the report suggests, by releasing more land for housing development, speeding approval processes, and improving public transit to accommodate the sprawl.
READ MORE: Reality check: Reining in Canada’s red-hot housing markets
In urban areas, a boost in high-rise construction would help keep condo and rental prices in check; more units mean more level prices, which will help employers find workers that can afford to live in the area where they work.
Overall, while having a red-hot housing market may appear scary to some, Canada has the chance to harness the housing market’s power for good, the report says.
“The memories of the U.S. financial crisis have left the impression that all house price booms end badly for the broader economy. With the right policy mix, it needn’t be so,” the report concludes.